The Electric Two-Wheelers Vehicle Industry in India

The Electric Vehicle (EV) market in India is quickly evolving into a complex sector that is governed by various demands made by various key stakeholders. India is on track to become the largest EV market by 2030, with a total investment opportunity of more than US$ 200 billion over the next 8-10 years. Electric vehicle registrations have climbed by 168%, from 120,000 in 2020 to 330,000 in 2021. India’s EV sector includes electric two-wheelers (E2Ws), electric three-wheelers (E3Ws), electric four-wheelers (E4Ws) and electric buses (E-Bus). With a growing population, increased environmental concerns, and rising fuel prices, there is a growing desire for economical and sustainable transportation solutions, and E2Ws are the best-suited option. India is the largest E2W and E3W manufacturer in the world. The Indian government has been encouraging the adoption of electric vehicles (EVs) through a variety of different policy incentives, including subsidies, tax incentives, and the construction of charging infrastructure.

Electric Two-Wheeler Market in India
India is one of the world's fastest-growing markets for Electric Two-Wheelers (E2Ws). The two-wheeler segment dominates the Indian automobile market, accounting for more than 70% of all registered vehicles. E2Ws are a convenient and efficient mode of transportation for short-distance travel, especially in cities. In India, the two-wheeler segment accounts for more than 50% of all petrol transactions. Two-wheelers are utilised in commercial applications such as logistics fleets for food and groceries, parcel and courier services, and passenger transport-related services. Two-wheelers that can effectively negotiate traffic are also being tested for first and last-mile connection via shared trips and bike taxi services. According to a study, electric two-wheeler sales penetration in India might surpass 80% by 2030.

The below line graph depicts the registered E2W sales between December 2021 to March 2023. It clearly illustrates the rising trajectory of E2W penetration in the Indian economy. In the month of March 2023, 86,067 registered E2W sales were recorded by the Society of Manufacturers of Electric Vehicles (SMEV).

Source: Society of Manufacturers of Electric Vehicles (SMEV)

Types of charging facilities for electric two-wheelers

Comparison Of Electric Two-Wheeler and Internal Combustion Engine (ICE) Two-Wheeler

Higher initial E2W costs may be attributed to the cost of the battery and other components, but the lower maintenance and fuel costs can outweigh the higher initial cost over time. Furthermore, E2W spare components are less expensive than those for regular ICE automobiles.

 Source: Alliance for an Energy Efficient Economy (AEEE)

Key Players and Vehicle Category of the Electric Two-Wheeler Industry in India

As depicted in the left graph, the pie chart represents the market share of the top 7 largest private players offering E2W in the month of December 2022-23 in the Indian EV industry. Ola has the largest market share of 26% followed by TVS (14.5%) and Hero Electric with 12.5%.

As illustrated in the below donut chart, represents the vehicle category of electric two-wheeler models. Level 1 (L1) i.e., the low-speed E2W acquire 65.2% of the as compared to Level 2 (L2) i.e., the high-speed E2W.

Exports
As represented in the bar graph, India’s E2W exports are anticipated to surpass US$ 28-30 million by 2030 at a CAGR of 10-12%.

Source: Redseer Strategy Consultants

Note: F - Forecasted

Opportunities

• Low cost of ownership

Any product or service must be affordable to be successful in India. The affordability of 2W among Indian households has been constrained by rising Total Cost of Ownership (TCO) and rising petrol prices, which have increased by 60% over the last five years. This is crucial for Indian users while deciding between EV and ICE 2W. The E2W makes economic sense for the Indian 2W users, as the total cost of ownership (TCO) is 20- 70% lower than an ICE equivalent 2W. Thus, the spurring demand for electric two vehicles is due to their greater efficiency and lower cost of electricity for charging it as compared to petrol or diesel.

• Accelerated Last mile deliveries

Over the years, there has been a significant increase in last-mile deliveries, and the pandemic has pushed this dependence even further on doorstep delivery. To meet this demand, last-mile delivery companies are increasingly turning to E2Ws, which offer a compelling economic proposition. Furthermore, E2Ws have a lot of potential for making the future more sustainable. As a result, these players are increasing the adoption of E2Ws.

• Better suited for busy cities

For many decades, two-wheelers (2Ws) have been the preferred means of transportation for cost-conscious Indians. This is due to their ease of manoeuvring on packed roads, reduced carbon emissions, and higher fuel efficiency. As a result, they are a cost-effective alternative to public transportation and 3 or 4-wheelers.

• India’s Green Goals

At the COP26 Summit in 2021, Prime Minister Mr. Narendra Modi declared that India would cut its anticipated carbon emissions by one billion tonnes until 2030. In order to achieve this goal, India is moving towards the electric revolution by making electric cars the preferred form of transportation for most commuters.

Government Initiatives

• FAME Scheme

The Government of India introduced the National Electric Mobility Mission Plan (NEMMP) 2020 in 2013 to offer a vision and roadmap for EV adoption and manufacture in the nation. The Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) initiative was introduced as part of this strategy in 2015. The programme has since been extended to 2024 with a budget of US$ 1.3 billion. The budget includes funds for the construction of charging stations as well as up-front incentives to lower the cost of purchasing vehicles. The government has also granted US$ 122.05 million (Rs. 1,000 crore) incentives for the development of EV charging stations under the FAME II scheme. In 68 cities across India, 2,877 public charging stations have been installed. There will be 1,576 stations installed over 9 expressways and 16 highways. Other than these public charging stations, private players (such as Ather Energy, Charzer, Statiq, and others) have added 3000 charging stations.

• Production Linked Incentives (PLIs) for Advance Chemistry Cells (ACC)

The government has invested around US$ 2.5 billion to this incentive scheme, which seeks to establish local manufacturing capacity of 50 GWh of ACC and 5 GWh of niche ACC capacity (planned). The programme intends to improve exports and generate economies of scale, helping big domestic and international manufacturers develop a competitive ACC battery production in India. To receive incentives under the programme, the government has agreements in place with three bidders, namely Reliance New Energy Solar, Ola Electric, and Rajesh Exports.

• Production Linked Incentives (PLIs) for Automobiles and Auto Components

The programme provides financial incentives to boost local manufacturing and attract investors into the car manufacturing industry's value chain. This plan intends to lower costs and provide a reliable supply chain for goods made with cutting-edge automotive technology. The approved candidates, in addition to commercial entities from India, also came from Japan, Germany, the United States, the United Kingdom, and the Republic of Korea, Ireland,

France, Belgium, the Netherlands, and Italy

• Others
• Union Budget 2023
  • Basic customs duty exemption on the importation of machinery used in the manufacture of lithium-ion batteries used in EVs, as well as vehicle parts and subsystems.
  • Customs duty on lithium-ion batteries is being reduced from 21% to 13%.
  •  Concessional basic customs taxes are being extended for electric vehicles and hybrid batteries.
  • Additional funding has been allocated to support the recycling of old vehicles.
  • The emphasis is on promoting the production of green hydrogen and biogas.
• Battery Waste Management Rules

The Ministry of Environment, Forest, and Climate Change published the Battery waste Management Rules in 2022 to ensure that battery waste is handled in an environmentally responsible manner.

The regulations stimulate the establishment of new firms and entrepreneurship in the collection, recycling, and repair of spent batteries. By demanding a minimum degree of material recovery from used batteries in the recommendations, new technologies, investments, and business opportunities will be brought to the recycling and refurbishment sector.

• Battery Swapping Policy (Draft)

In order to improve the efficient and effective use of resources (public funds, land, and raw materials for advanced cell batteries) for the provision of customer-centric services, NITI Aayog designed the draft of battery swapping policy. EVs with swappable batteries are eligible for the same incentives as electric vehicles with fixed batteries installed from the factory. According to the proposed legislation, the size of the incentive would be determined by the kWh rating of the battery and compatible EV.

Road Ahead
Over the last ten years, India has emerged as one of the world's most favoured places for producing high-quality automotive components and automobiles of all types, closing the gap with numerous established countries in the process. Due to the relative cost and ease of two-wheelers, they have historically led in terms of growth and penetration among the major vehicle categories in India. A high degree of market penetration for electric-powered two-wheelers should be achieved as EVs represent the future of the mobility sector. Collectively, such government interventions have the potential to trigger a paradigm shift in the ecosystem that would increase the use of renewable energy in the domestic industry and increase consumer adoption of new and novel technology.